Black Belt Negotiators: How to win internal allies
By Paul Teague -- Purchasing, 1/15/2009 2:00:00 AM
Purchasing's smartest negotiators move from conflict to collaboration fast. Match your wits against these pros. Guess their strategy. Then, read what they really did atpurchasing.com/negotiations.
Possible alternatives: Teach negotiations skills to operations, bring operations personnel into purchasing organization, or place purchasing under operations. To find the solution, seewww.purchasing.com/negotiations.
A major company in the food-processing industry sources clean-in-place chemicals. They are a critical material for the company, but the supply base had dwindled from approximately seven companies to three major companies. The food-processing company had eliminated one of the three during negotiations for a new contract. The remaining two said there would be major increases in cost for the chemicals.
Background: Traditionally, the operations group, not purchasing, selected the chemicals suppliers for each plant. Purchasing only processed the contracts. Despite the expertise in the purchasing organization, experienced buyers had no voice in supplier selection. Purchasing's first job was to convince operations to allow buyers to get involved. To find out how it did and whether that saved money, see www.purchasing.com/negotiations.
Possible alternatives: Teach negotiations skills to operations, bring operations personnel into purchasing organization, place purchasing under operations.
Solution: During the previous year, purchasing sent a customer-satisfaction survey to all plants asking, among other things, if they would be willing to switch to other suppliers. Half of the plants said they would be willing to make the change. Purchasing then gave the survey results to the operations group and asked that group for permission to bid the cleaning-chemicals in an RFP. While operations disputed the survey results, they admitted that 50% was still a big number and agreed to partner with purchasing. Operations gave purchasing support to put the chemicals out to bid for a few plants. Operations informed the suppliers of the bid.
The chemicals companies gave major presentations to purchasing. They said their raw materials increases for some products would increase 20 to 60%. That would have resulted in potential increases in price for the food processing company of 5 to 15%. They also said there may be allocations due to short supply.
Operations supported purchasing’s plan to turn the negotiations into a competition for market share. After prolonged negotiations, purchasing signed contracts that delayed price increases by nine months and lowered the size of the increases to under 5%, split between two installments.
The key was that the operations group trusted purchasing. Purchasing had built trust by showing savings, showing that other internal purchasing customers were satisfied and showing that purchasing understood operations’ needs. It also helped that purchasing asked for operations’ assistance.
Are you a black belt negotiator? Tell us about one of your negotiation successes, and we'll print it so others can learn from your experience. Send it to pteague@reedbusiness.com.
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